World’s first net-zero standard for companies

An increasing number of companies aim to make their business models and economic activities carbon neutral. By setting net-zero targets, they seek to reduce their greenhouse gas emissions to nil by implementing directed strategies and measures. However, this endeavour previously lacked guidance and models.

“Companies currently set their own net-zero targets,” states Alberto Carrillo Pineda, Co-Founder and Managing Director of the Science Based Targets Initiative“ (SBTi), an independent partnership of renowned organisations including the WWF, UN Global Compact, World Resources Institute and CDP. This is why the SBTi has created a basis for climate protection goals built on science: the Net-Zero Standard, which was published by the Initiative in late October 2021.

Initiative audits and certifies climate protection plans

The basis for the Standard was provided by the Paris Climate Agreement, in which 197 nations agreed at the UN Climate Conference in Paris in December 2015 to limit global warming to significantly under two degrees Celsius – a goal that more and more companies are adopting. To this end, they can set themselves a science-based target (SBT) – a reduction goal that takes account of the state of the art in climate protection.

SBTs specify the requirements that companies must meet in order to be in line with the Paris Climate Agreement. Once this has been accomplished, the Initiative reviews the plans and issues certifications.

Energy giant RWE is among those which have set themselves ambitious targets. The company’s emission reduction goals for 2030 have been certified by the Initiative as being compliant with the climate targets since December 2020.

Indirect emissions must also drop to nil

Reducing greenhouse gas emissions to zero is an extremely complex process. Here, companies must differentiate between direct and indirect emissions, which can be broken down into three categories:

• Scope 1 encompasses direct emissions, e.g. those produced generating electricity in power stations;
• Scope 2 covers emissions resulting from purchases of energy in the form of electricity and heat; and
• Scope 3 consists of emissions arising along the supply chain.

The SBTi is convinced that emissions must be reduced in all areas in order to achieve a net-zero target. This means that its is not enough for an energy company to reduce the carbon dioxide emissions of its power plants alone (Scope 1). Indeed, the company must also look to the emissions generated in producing and transporting goods along its entire supply chain, for instance when it buys and installs new wind turbines (Scope 3). These must be considered in its decarbonisation plans as well.

Clear plan based on scientific findings

With the Standard, the SBTi provides “companies with a clear path for bringing their net-zero plans in line with scientific findings,” says Johann Rockström, Director of the Potsdam Institute for Climate Impact Research (PIK) and Professor of Earth System Sciences at the University of Potsdam.

Says Alberto Carrillo Pineda: “The SBTi Net-Zero Standard provides companies with the first solid certification with which they can prove to consumers, investors and regulatory authorities that their goals reduce emissions at the speed and to the extent necessary to limit global warming to 1.5 degrees Celsius.”